Income Per Capita and Unemployment.

 Income Per Capita and Unemployment

According to the World Bank, in 2021, countries with per capita incomes of $1,025 or less were classified as “low income developing countries” and this category of countries had the least levels of economic growth advances. In comparison to other macroeconomic indicators, per capita income is used to evaluate the general health of the economy.
In its report, World Bank (2021) stated that 9 out of 10 countries with the highest per capita incomes are in the Advanced Countries. Luxembourg has the highest per capita income, while Burundi has the least. The most dynamic relationship between GDP per capita and unemployment rate is contained in Okun’s law in economics. This law asserted that a country’s GDP must grow at about 4% per annum for a 1% reduction in the level of unemployment.

Unemployment has devastating effects on the individual, society, and the economy. Unemployment creates challenges that include the inability to find future jobs, decreased personal savings, and incomes. The longer an individual stays out of work, the more likely they experience the negative multiplier effects associated with unemployment. Being out of work is a stressful condition that results in several health challenges, and increases the incidence of frequent visits to health specialists as most employed individuals rely so much on their jobs to provide health insurance. The state of unemployment exacerbates declined health and negative consequences on an individual’s mental health, including depression, low self-esteem, and anxiety disorder. The personal and social cost of unemployment is immeasurable, and these include financial hardships, in the event of low savings, poverty, debt, family tensions, and societal stigma.

An increase in the level of GDP grows income per capita. There are several ways countries can grow their GDP, and these include education, training, and upgrade in job skills which allow individuals to raise productivity and increase the output of goods and services in the economy. Improvement in the level of capital, available to companies and industries, can raise the level of available technology and improve productivity which ultimately grows GDP levels. Governments can also raise the levels of private consumption expenditure by paying higher salaries, promoting a conducive business investment environment, and improving the markets for exports and imports. As long as growth in GDP exceeds growth in the labor force participation rate, the level of employment will rise. Ultimately, the higher the growth rate in employment than labor force growth, more jobs will be created, and the unemployment rate will fall.